DALLAS-Rising gas prices, interest rates and problems in the stock market all contributed to sales and earnings drops at Tuesday Morning Corp., executives said during their second-quarter conference call. “The current environment is challenging for the home-furnishings sector,” says Kathleen Mason, the retailer’s chairman and chief executive officer.

During the quarter, which ended on June 30, year-over-year same-store sales plunged 10.8%. Net sales also fell, by 5.1%, to $207.7 million. Net earnings were $2.9 million, down from $10.5 million in last year’s second quarter.

Though Tuesday Morning is in a sales slump, the company is not cutting its growth plans. It has opened 30 new stores so far this year and is planning another 35 to 40 by the end of 2006. The company currently operates 762 units in 46 states.

Intense advertising and markdowns by competitors have also contributed to Tuesday Morning’s performance, Mason says. To combat its struggles, the company is changing its inventory. “We’re shifting our assortment from more decorative to more functional,” she says.

Earlier this month, Tuesday Morning’s board hired Elizabeth Schroeder as executive vice president and chief financial officer. She held the same title at her last job, for hospitality company Wyndham International.

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